Are we going to have too many properties?

My partner and I currently "own" three houses. House 1 has 50 grand left to pay off of 400 grand.House 2 has the full mortgage to pay off of a 430 grand mortgage.House 3 has a 350 grand mortgage with 150 grand already paid off.All these properties have tenants as we live in the bush and do not currently pay rent.He has currently inherited 150 grand and wants to buy another house. Currently it seems affordable but I am really wondering if we are putting too many eggs in one basket?What do you think?We both earn an average of 100 grand a year each. But this could be less if we moved back to the city.Feeling very confused!

Hi Cat, To have the greatest chance at success in investing property, you need to buy the right 1st property, and it sounds like you have. The hardest part of building a portfolio is getting past three without getting into financial stress, and growing to twenty is far easier than getting from zero to three!

74% of investors stop at one and 93% of investors stop at two. Why? Answer: Lack of a Strategic Plan. You have got to have a plan.

A Buyer's Agent can help create a plan that is right for you.

Start by creating the four major steps you need to build a stable property portfolio:

Step One: PlanningStrategic Plan: Where do you want to be and when?Structure Plan: How are you going to hold your assets?Risk Management Plan: What are the risks and how are you going to manage them?Finance Plan: How are you going to structure your finance and when do you start to pay down debt?

Step Three: Property SelectionProperty research is in 2 categories: statistical and fundamental. There are 15,000 suburbs around Australia, you need to pinpoint the suburbs that have a demand/supply imbalance. These areas have the best chance of increasing in value well above the national & state average.

This is how we research our ratings:Statistical1. Number of Days on the market – The lower the better, we also watch out for areas that are deceasing2. % of vendor discounting – The lower the better, less choice and less ability to negotiate. 3. Auction Clearance Rate – The higher the better, indicating higher demand4. Rental Yield – The higher the better, indicating a higher demand and potential rental growth5. % of Stock on Market – The lower the better, more demand creates a premium in pricing6. Online Search Interest – The higher the better7. Rental Vacancy Rate – The lower the better, this % the better it is for investors 8. Proportion of Renters to Owners – The lower the better, creates better suburb perception

If these metrics combined give us a rating that indicates the demand is exceeding supply (market is imbalanced), then we move onto the fundamental searches to validate the statistical data.

Fundamental Indicators1. Proximity to Water/Ocean2. Views of Hills/Mountains3. Transport Infrastructure – Recently announced, in progress or to be shortly started that will reduce commute times to the CBD and increase demand for a suburb4. The ripple effect of close suburb neighbours. If suburbs within close proximity have grown substantially recently, the chances are that the subject suburb will grow quickly in order to maintain a pricing balance between the growth suburb and the subject suburb5. Project Booms – Are there any large projects nearby that will create a spike in demand (Transport links, Business Parks, Urban renewal projects)6. Ugly Ducklings – Has the suburb been branded rough or ugly in the past and the only problem with the suburb is its reputation? Are private buyers updating their properties in the area? Are developers buying up new land and building new apartments? Are businesses and trendy cafes entering the area now?7. Government Works – Has the government put forward a proposal to improve the appeal of an area (Parks, malls, entertainment, shopping precincts)8. Lifestyle Features – Are there any lifestyle amenities nearby like golf courses, large entertainment precincts, tourist attractions

Statistical & Fundamental research reveal that the suburb is a potential hotspot, then we drill down to find the best streets within the suburb and then find developments within close proximity to those to give the best chance of fast capital gains.

Step Four PurchaseNow you are ready to buy and you know exactly what to buy and where. A proper plan lets you sleep at night knowing you have managed most of your risks.